SC order raises questions on the way Banking Regulation Act empowered RBI

The amendment in the Banking Regulation Act empowered the Union govt to authorise the RBI to issue directions to banks for initiating proceedings in case of a default in loan repayment under the IBC

The Supreme Court (SC) order quashing the circular of the Reserve Bank of India (RBI) issued on February 12, 2018, may have given relief to promoters of a large number of projects facing insolvency proceedings under the Insolvency and Bankruptcy Code (IBC).

But the apex court’s order, details of which are not yet available, will also raise many questions about the jurisdiction and effectiveness of the RBI as the banking regulator and, more importantly, about the validity of the amended provisions of the Banking Regulation Act. There will also be questions over the role of the RBI in future resolution